Water Treatment and Distribution services PPI in Hungary Warsaw, Poland

Water Treatment and Distribution servicesPPI in Hungary

Warsaw, Poland

Ildikó Hamvainé Holocsy

October 4, 2012

Water Treatment and Distribution services in Hungary 2

Content

1. INTRODUCTION

2. DEFINICION OF THE SERVICE

3. PRICING UNIT OF MEASURE

4. MARKET CONDITIONS

5. CLASSIFICATION STRUCTURE AND DETAILS

6. EVALUATION OF STANDARD VS. DEFINITION AND MARKET CONDITIONS

7. DISCUSSION OF PRICING METHODS

8. QUALITY ADJUSTMENT

9. EVALUATION OF COMPARABILITY REGARDING TURNOVER/OUTPUT MEASURES

10. SUMMARY


Introduction

Responsibility for water supply and sanitation provision : municipalities

Regulation: National water strategies and rules Water Supply and Sanitation (WSS), policy of EU Local policies, may contain special approaches and

solutions concerning details on the practices (tradition, diversity and quality of available water sources, natural, environmental and financial conditions).


Introduction Water sources

Hungary is rich in freshwater; groundwater; thermal water sources.

The main freshwater sources are: Lake Balaton; river Danube (417 km in Hungary); river Tisza (597 km in Hungary); their watershed area; further freshwater sources.


DEFINICION OF THE SERVICE Size of the industry

GDP in Hungary, 2009

Services (beyond STS);

54,5%;

Agriculture; 3,4% Industry;

23,4%

Services (STS); 12,5%;

13%

Water, waste ; 1,2%

Construction; 4,9%


Arsenic (As) content of drinking waterin Hungary

Arsenic (As)

• Contested

▲ Not contested

Source: Hungarian Medical Institute


DEFINICION OF THE SERVICEMacroeconomic indicators

Macroeconomic indicators in Hungary at the level of the national economy, section E, 2009

0,3

1,0

1,2

0,50,4

0,10,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

GDP Gross output Number of enterprises

%

E Water, waste E 36 Water


DEFINICION OF THE SERVICEMacroeconomic indicators

GDP in Hungary, section E, 2009

4

11

41

44

0 10 20 30 40 50

39 Remediation …

37 Sew erage

38 Waste collection …

36 Water collection …

%

NACE Rev. 2

Net Turnover in Hungary, section E, 2009

10

9

36

45

0 20 40 60

39 Remediation …

37 Sew erage

36 Water collection …

38 Waste collection …

%

NACE Rev. 2


Market conditions

Market structure in Hungary

Different type of ownership Municipalities; Community (state) owned waterworks; Regional operators; Private water companies, mainly

multinational (French, German and Austrian) companies.


Market conditions (2)

Partial privatization of public services combined with long term management rights given to private companies

Effect of privatization

The most important question:

Relationship between company ownership and water prices

Do privatised companies set higher prices than the community-owned waterworks?



Water prices are subsidised in Hungary Household water prices are lower than industrial

prices Water tariffs hardly cover the operation costs. Central subsidies help to keep prices below a

threshold Outsourced activities are typical, generally provided

under a fixed term contract by suppliers (providing a degree of power by increasing switching costs).



WSS services are provided

often by the same company; there are a number of waterworks dealing only with

water; there are a few dealing only with wastewater.

For example:

Budapest Water Works provides water supply; Budapest Sewage Works is responsible for the

wastewater management.



Source of the data:

The annual structural survey

(Enterprises classified in division E 36) The annual survey for statistics on industrial

production (enterprises classified to industry (sections B,C,D), as well as non-industrial enterprises)


Annual structural indicators by size classEnterprises classified in division E 36

(2009. year)

Size class

Number of employees

TurnoverValue-added at factor cost

capita %(Million HUF)

%(Million HUF)

%

Total Size class 19.863 100,0 216.124 100 105.822 100

1-9 employees 422 2,1 6.598 3,1 1.611 1,5

10 to 19 employees 386 1,9 3.985 1,8 1.625 1,5

20 to 49 employees 1.142 5,7 12.316 5,7 4.170 3,9

50 to 249 employees 5.058 25,5 44.706 20,7 19.782 18,7

250 and more employees 12.855 64,7 148.520 68,7 78.634 74,3


The annual production of industrial products and servicesThe frame of observation is all enterprises classified

to industry (sections B,C,D), as well as non-industrial enterprises

Period of time: 2010. year

Accounts

Published data of annual industry statistics

Number of production enterprise

s

Number of productio

n enterprise

s

Total sales value

Total sales value

pieces %Million

HUF%

36== Water collection, treatment and supply 187 100,0 123.632.903 100,00

360010 00 0 702 - Natural water (1000 m3) 164 87,7 118.352.136 95,7

360011 00 0 702 - - Drinking water (1000 m3) 150 80,2 114.994.199 93,0

360012 00 0 702 - - Non-drinking water (1000 m3) 33 17,6 3.357.937 2,7

360020 00 0 706 - Treatment and distribution services of water through mains (1000 HUF)

35 18,7 4.319.131 3,5

360030 00 0 706 - Trade services of water through mains (1000 HUF)

7 3,7 961.636 0,8


CLASSIFICATION

In Hungary the harmonized national versions of the following economic classification systems are applied:

NACE Rev 2 / TEÁOR’08 (the statistical classification of economic activities in the European Communities / in Hungary).

CPA’08 / TESZOR’08 (the European/ Hungarian classification of products by activity).

PRODCOM / ITO is the classification of goods used for statistics on industrial production in the EU / in Hungary).


EVALUATION OF STANDARD

PRODCOM / (ITO in Hungarian) code:

XXXX.XX.XX

NACE Rev. 2 CPA’08 PRODCOM

For activities classified to the section 36:

Code of the service: (3600.XX. 00)


PRICING UNIT OF MEASURE

Classification

Name of the service

Code CPA/group

Unit of measure

Household charges 3600.11/1901 m3

Institutional charges 3600.11/1902 m3

Affiliate fee 3600.11/1903 1000 m3

Basic fee (water meter) 3600.11/1904 HUF/piece/month

Industrial 3600.12/1905 1000 m3

18


PRICING METHODS

The main used pricing methods Using prices of repeated services Component pricing


Prices

The main price determining factors: Type of supplier / consumer; Amount of the water consumed; Region.

Price = Basic fee (depending on the type of the water meter)

+

price for the water (depending on the amount consumed)

+

sewerage charges


Weighting structure

Weights 2 years prior to the actual year are used

The other type of indices are chain linked.Long time series are chain linked with annually up-dated weights.

For aggregation of PPIs (previous month = 100)

Source of weights

Indices of CPA 4 digit PRODCOM 6 digit

Indices of higher level SBS data

21Water Treatment and Distribution services in Hungary


Index calculation

Price relativesof representative items

Indices of commodity groups (CPA / PRODCOM 6. digit)

(unweighted mean of price relatives)

Indices of higher level(weighted mean of CPA 4 digit indices, Laspeyres)

Indices of the CPA 4 digit level (weighted mean of commodity groups, Laspeyres)


Consumer Price index (CPI)

The Harmonized Index of Consumer Prices (HICP)Category „Water supply (04.4.1)” Includes water supply and associated expenditureExcludes drinking water sold in bottles or containers and hot water

This category is a subcategory of the Housing, Water, Electricity, Gas, and Other Fuels and

Of Water Supply and Miscellaneous Services Relating to the Dwelling categories.


RESULTS(2005 = 100)

PPI and HICP, 2007-2011

100

120

140

160

180

2006 2007 2008 2009 2010 2011

%

Hungary Total PPI Hungary 36-PPI

Hungary Total HICP Hungary Water s. HICP


OU

TL

OO

K in

th

e E

U

PPI, Water collection, treatment and supply, 2011

101

105

109

110

118

118

121

124

124

130

135

137

142

142

145

145

147

153

171

191

213

115

123

100 150 200 250

Netherlands

Austria

Slovenia

Germany

Belgium

Sw eden

Lithuania

Italy

Greece

Spain

Finland

Czech Republic

Slovakia

Cyprus

Poland

Hungary

Luxembourg

Estonia

Bulgaria

Latvia

Malta

Romania

Euro area (17)

EU (27)

%

2005 = 100


QUALITY ADJUSTMENT

The main used methods are: overlapping method; imputation of averages of similar categories

or higher level aggregates; comparable adjustment;


COMPARABILITY

Inconsistency regarding Classification of services related to the section 36 (Industry

vs. Service sector ?) Coverage of the total industrial macroeconomic indicators

(labour, output, indices)

PPIs In Hungary

for some combination of groups of branches are available: Industry excluding division 36 (B+C+D) Industry including division 36 (B+C+D+E36) Industry including section E (B+C+D+E)


COMPARABILITY of the PPIs

PPI’sare harmonized with the European short

term regulation (STS)

Source of data: monthly statistical surveyenterprises classified in the industry


SUMMARY

To produce comparable macro-economic indicators regarding WSS services at the word level is needed

Consistency of main classification systems (Industry vs. Service sector ?);

Consistency concerning coverage of the statistical indicators (total industrial output; total PPI);

Validation process to ensure completeness of quantity and value data;

Cooperation between all players: data suppliers,

statisticians at national as well as at international level; Handle the effect of globalization.


Thank you for attention!

[email protected] 30

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Water Treatment and Distribution services PPI in Hungary Warsaw, Poland

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